Rupee, bond yields keep an eye on US, India inflation data

Rupee, bonds in focus: The Rupee and bond yields this week will closely monitor US inflation data for signals on when the Federal Reserve might adjust borrowing costs, along with India's own inflation figures. 
The US inflation numbers are scheduled for release on Thursday, while India's data is expected the following day.

According to a treasury official at a bank, the US data holds greater importance for the Rupee, whereas for bond yields, the focus is on India's data. He anticipates the Rupee to trade in the range of 83.00-83.30, displaying an upward bias. 

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The Rupee concluded the previous week at 83.15, registering a 0.1 per cent increase week-on-week and outperforming most of its Asian counterparts.

Despite the closely observed US jobs report released on Friday, traders do not anticipate any major impact on the Rupee.

While the December employment figures exceeded expectations, indicating higher wages, the revised lower job additions in the previous two months suggest a notable hiring slowdown. 

ANZ noted a 3-month average of 165,000, down from 284,000 a year earlier, but the overall momentum appears too robust for the Fed to consider rate cuts in March.

On the bond front, India's 10-year benchmark bond yield concluded the first week of 2024 at 7.2348 per cent, marking a six-basis-point increase for the week. 

Traders expect the yield to fluctuate within the 7.18 per cent-7.27 per cent range this week, anticipating heightened volumes after recent shallow trading.

Despite this, some traders express optimism, foreseeing a decline in bond yields. 

The outlook suggests India's benchmark bond yield may ease by approximately 50 basis points, reaching 6.75 per cent in the coming months, with shorter-end debt experiencing more significant drops, contributing to a steeper yield curve, according to Vikas Goel, managing director at primary dealer PNB Gilts.

In 2024, the domestic yield curve is expected to steepen amid expectations of rate cuts from both the Federal Reserve and the Reserve Bank of India. 

The actions of foreign investors, who continued buying government bonds in the first week of 2024 following their most substantial purchases in six years in 2023, remain a focal point.

(With Reuters Inputs)